Elderly on West and South Sides targets of reverse mortgage scheme, say advocates

Lillie Williams took out a reverse mortgage on her house in North Lawndale to pay for home repairs, but she said the person she worked with didn’t explain the process or give her proper documentation. Now, she’s saddled with insurance payments for her new mortgage that she cannot afford.

From the moment Lillie Williams and her sister, Ethel Winters, bought the two-story greystone house in the 1500 block on South Drake Avenue, it became the hub of family life.

During the week, generations of the family would gather at the home in the North Lawndale neighborhood on the city’s West Side. On holidays, Williams would cook turkey and dressing and bake ham and pies. Even today, the mere mention of the feasts still makes family members rub their stomachs.

The house, which the sisters purchased in 1973 for $11,000, is also a critical element of the family’s financial legacy, according to Walter Williams, one of Lillie Williams’ three children.

“It’s all we’ve got,” he said. “This is the centerpiece of our entire family.”

But the centerpiece has been under threat since 2009. That’s when Williams said she fell victim to a reverse mortgage scam orchestrated by Mark Diamond, a Chicago businessman who has been named in dozens of lawsuits dating back years and has been the focus of several news stories.

Diamond said he could help Williams repair her bathrooms and kitchen using money from the equity in her home. But he didn’t explain how the process works, as required by law. Nor did he give Williams the reverse mortgage documents, according to a complaint she filed with Illinois Attorney General Lisa Madigan’s office this month.

Reverse mortgages are a tool for senior citizens to convert a portion of their home’s value into cash. The loan doesn’t have to be repaid until the person moves out of the house or dies. If family members want to keep the house, they have to pay off the debt.

Since taking out the reverse mortgage, Williams, in her late 80s and living on a fixed income of less than $1,000 a month, said she has become saddled with about $6,000 in insurance that she cannot pay. Under the terms of a reverse mortgage, the owner has to maintain insurance or risk defaulting on the loan. Williams had paid off her previous mortgage and never would have jeopardized her home if she understood the consequences of her decision, relatives say. Now, the longtime family gathering place may be lost because of the insurance fees.

Diamond has victimized dozens of elderly African-Americans on the city’s West and South Sides with similar schemes over more than a decade, according to state and federal lawsuits, including a 2009 lawsuit filed on behalf of dozens of homeowners by Madigan’s office. The lawsuit alleged that Diamond and five other home repair and mortgage companies targeted black homeowners in the area, stripping nearly $1.3 million in equity from the homes of at least 36 people.

An uptick in the number of complaints against Diamond in 2014 prompted the attorney general’s office to seek an injunction in October to prevent him from doing business while the lawsuit winds its way through federal court. Last week, Judge David Atkins set a March 30 date to argue the motion for the injunction.

The 2009 lawsuit was not the first time Madigan had taken Diamond to court. In 2003, her office and the Federal Trade Commission signed a consent order banning him and his company, OSI Financial Services, Inc., from misrepresenting mortgage terms. Yet despite the consent decree and lawsuits, Diamond has continued to solicit new customers by working with other companies to sidestep the decree, according to Madigan. Rather than granting subprime mortgages, which he did before the consent order, he now pushes home repairs funded by reverse mortgages.

Diamond did not respond to multiple calls from the Reporter for comment. In an email response, Dennis Both, his attorney, directed the Reporter to pleadings and court filings.

The complaints against Diamond underscore the challenges of enforcing consumer-protection laws and holding businesses and individuals who break the laws accountable, Madigan told the Reporter.

“You put a certain entity out of business, they reappear or incorporate under another name,” she said.

Different victims, same tactics

In 2009, the same year Madigan’s office filed the lawsuit, a woman named Cynthia knocked on Williams’ door. She was going door-to-door in the neighborhood talking to residents about financing home repairs.

Diamond visited Williams a few days later, claiming he could fix up the home. She wouldn’t have to pay a cent, he said.

Initially, Williams resisted. But after the third visit, she decided to go ahead with the repairs to the bathrooms and kitchen, as well as constructing a new roof for the front porch and tuck pointing the front of the building.

Cynthia drove Williams to Diamond’s office where she signed the paperwork for the reverse mortgage. Williams said Diamond took nearly all of the $120,000 — the amount she recalls receiving from the house — for repair work on the first and second floors, leaving her with about $1,000. Some of the repairs were done, but Williams said she never saw the bill for them.

The non-profit Legal Assistance Foundation of Metropolitan Chicago mapped the location of many of Diamond’s victims. Nearly all were black residents on the city’s West and South Sides, said the foundation’s attorney, Michelle Weinberg, who has filed a number of suits against Diamond.

In December, Weinberg’s organization sued on behalf of Elnora Archie, a 78-year-old resident of the West Garfield Park neighborhood on the West Side whose interactions with Cynthia and Diamond were nearly identical to those of other victims.

Diamond has yet to respond to the allegations in the Archie suit.

There have been plenty of other cases against Diamond.

In a 2011 lawsuit filed on his behalf, Willie Buckner, an 80-year-old resident of the East Garfield Park neighborhood on the West Side, alleged that he signed a reverse mortgage with Diamond under fraudulent circumstances. Diamond pocketed the proceeds, worth more than $119,000, according to the complaint. Buckner never received a penny. The case ended with a consent judgment, a sealed agreement between Buckner, Diamond and the other defendants.

The lawsuit also noted that the Urban Financial Group, the mortgage company with which Diamond worked to secure Buckner’s loan, had engaged in “reverse redlining.”

In 2009, more than 70 percent of the company’s loans in the six-county area were made in neighborhoods where at least 80 percent of the residents were black, the complaint said. In Chicago, the company issued loans in just 10 community areas, including the Austin, Englewood and North Lawndale neighborhoods on the South and West Sides.

More than 60 percent of the borrowers were women, according to the complaint.

Weinberg said the total number of people impacted by Diamond and his associates is much larger than those who have sued him.

“What we see as far as what we do is the tip of the iceberg,” Weinberg said.

Limited legal options

Meanwhile, Diamond maintains his practices, apparently unaffected by the stream of stories, suits and sanctions.

In 2010, the Illinois Department of Financial and Professional Regulation fined Diamond $25,000 and revoked his mortgage broker’s license for four years. His activities have been cited in U.S. Senate testimony about subprime lending and featured in national exposes about mortgage fraud introduced by former CBS anchor Dan Rather and in The New York Times. He’s also been mentioned in local news coverage starting in the 1980s.

“It is both outrageous and frustrating that somebody who is intent on defrauding those in need can get away with it year after year despite a consent order being in place,” Madigan said. “Sometimes the justice system is slow and inefficient when it comes to bringing justice.”

Kari Beyer, like Weinberg a lawyer at the Legal Assistance Foundation, said her organization cannot file class-action suits because it receives federal funding. Instead, lawyers pursue cases for individuals that can take years and might result in the plaintiffs receiving some, but not all, of their money.

In some cases, the victims have died before the case is concluded, Weinberg said.

Sudie Green, another longtime West Side homeowner from the Austin neighborhood, took out a reverse mortgage after meeting Cynthia and Diamond. She said Diamond and his associates should be convicted of criminal charges.

“They should be in jail,” said Green, who sued Diamond and others in 2014, alleging that he took more than $122,000 from her reverse mortgage. “That’s the only thing I should say.”

Madigan said her office has talked to criminal authorities about Diamond but declined to say which offices she had contacted.

U.S. Attorney spokesman Randall Samborn said the office does not comment on whether it is pursuing an investigation until charges have been filed.

A community takes action

Clyde Ross, a 91-year-old veteran of the housing battles on the West Side, is among the people whose testimony is included in the injunction filed by Madigan’s office. In the 1960s, Ross was a pivotal figure in the Contract Buyers League, a group of North Lawndale residents who fought against the discriminatory practice of selling housing contracts to African-Americans at high prices while denying them mortgages.

Ross testified that he signed a contract with Diamond in 2012 to outfit his bathroom to accommodate his son, Tim Ross, a former Marine who was wounded in the line of duty and confined to a wheelchair. He also cannot use his right arm.

Diamond took all of the money from the mortgage for a number of repairs, according to court records, but did such a shoddy job on the bathroom that Tim risks further injury every time he uses the toilet or takes a shower.

Last week, the Rev. Robin Hood, Lillie Williams’ nephew and the founder of the Illinois Anti-Foreclosure Coalition, attended the injunction hearing in Atkins’ court with 10 people who had been affected by Diamond. Earlier that day, Hood led a group of 20 people to Diamond’s home in Chicago to protest his business practices.

Hood wants to spotlight the impact of reverse mortgages on the loss of intergenerational wealth among African-Americans.

“We want to make him the poster child for ‘We’re not going to take it anymore,’” he said.

The group plans to go to the local Department of Housing and Urban Development office on March 30, the next scheduled court date for the injunction, and present a request to undo all reverse mortgages associated with Diamond, Hood said.

“We’re talking about stopping reverse mortgages that have devastated the community,” he said, “took the homes from our seniors and stopped our young people from inheriting their rightful properties.”

About 4,500 vacant properties are currently registered with the City of Chicago. The number of vacant properties in the city could be seven times higher than that figure, according to some estimates.

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About Chicago Reporter

Founded on the heels of the civil rights movement of the 1960s, The Chicago Reporter confronts racial and economic inequality, using the power of investigative journalism. Our mission is national but grounded in Chicago, one of the most segregated cities in the nation and a bellwether for urban policies.